Hannover Re expects stable pricing for 2025 treaty renewals

In recent insights, Hannover Re said that it expects stable prices and conditions for property and casualty reinsurance treaty renewals on Jan. 1, 2025. The reinsurer forecasts a balance between supply and demand across most markets.

In 2024, treaty renewals saw improvements in pricing and conditions in some areas, while others remained stable compared to the previous year. Hannover Re used the favorable market environment to grow its portfolio with existing clients and secure new business.

While some primary insurance markets have seen modest price reductions following significant increases in prior years, Hannover Re noted that it continues to emphasize non-proportional reinsurance covers.

“We want to grow with our clients and continue to offer the best possible coverage and capacity. To do this, rate levels must remain adequate. Insured losses are still trending higher, and with the challenges facing the industry, reliable reinsurance protection is indispensable,” said Jean-Jacques Henchoz (pictured above), chief executive officer of Hannover Re.

As of June 2024, Hannover Re reported a capital adequacy ratio under Solvency II of 276%. Rating agencies have affirmed its financial strength, with Standard & Poor’s rating the reinsurer AA- and AM Best assigning an A+ rating, both with stable outlooks.

Hannover Re also said that it continues to focus on emerging risks in collaboration with its business partners, developing both traditional and innovative solutions. One example is the launch of the world’s first catastrophe bond designed to cover cloud outages, brought to market in April 2024.

The reinsurer is responding to the growing threat of cyber risks, which have increased as digital transformation advances.

“While cyber risks remain a significant area of concern, climate change is one of the most pressing challenges of our time. Recent floods and heatwaves have underscored the increase in extreme weather events, which is a strain on the economy and continues to test insurers,” said Sven Althoff, a member of Hannover Re’s Executive Board.

Market outlook for 2025

Hannover Re expects continued stability in pricing and conditions across European markets, despite some regions experiencing fewer extreme weather events in 2024 compared to the previous year.

In Germany, car insurance remains unprofitable, and further rate adjustments are likely. Meanwhile, the UK and Ireland saw rate increases, particularly in motor insurance, though some liability lines stabilized.

In North America, property business continues to benefit from increased premiums, driven by strong demand and frequent mid-sized losses. Social inflation, litigation costs, and rising damages in liability lines remain concerns for reinsurers. Hannover Re expects ongoing adjustments in prices and conditions for liability segments due to these factors.

Latin American markets, previously insulated from natural disasters, were hit hard in 2023 by Hurricane Otis in Mexico and floods in Brazil. This led to increased demand for reinsurance, driving up rates. In the Asia-Pacific region, Hannover Re’s relationships with clients in China and India remain strong, while higher retentions are anticipated in response to reinsurance cost increases in Japan, Korea, and Southeast Asia.

Australia and New Zealand experienced a relatively quiet 2024, though rising insured values and inflation continue to drive demand for catastrophe coverage.

What about specialty and casualty?

The market for catastrophe business saw increased demand in 2024, with stable prices at an attractive level. While the 2024 Atlantic hurricane season started early with Hurricane Beryl, losses remained relatively low.

However, Hannover Re expects the overall season to surpass the 30-year average in terms of activity. In response to these risks, the company continues to see strong demand for reinsurance capacity, particularly in North America.

In aviation reinsurance, after several years of price improvements, conditions have stabilized. Rates for space covers have hardened significantly due to large losses in 2023 and 2024. Hannover Re has scaled back its involvement in this segment and will continue to evaluate pricing and conditions before committing further.

In marine and offshore energy reinsurance, geopolitical tensions, including the war in Ukraine, continue to drive up risks. Despite moderate expenditures from these events, Hannover Re expects stable pricing for marine risks.

Hannover Re’s focus on structured reinsurance remains strong, with the premium volume in this segment reaching €6 billion. The company said that it also continues to lead in the insurance-linked securities (ILS) market, transferring €3.4 billion of catastrophe bonds to the capital markets in the first half of 2024. Demand for structured reinsurance remains robust, offering growth opportunities while helping clients mitigate earnings volatility.

Hannover Re anticipates stable demand for facultative reinsurance, particularly in property and casualty business, with growth expected in the renewables sector.

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